Could You Cope with an Interest Rise?

Mortgage interest rates have been at a historic all-time low for quite some time now. This is one of the reasons why many new investors have entered the buy to let market. Low interest rates combined with rising rents has meant very attractive rental yields in many parts of the country. Demand for

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rental property is also high, which makes it easier to find tenants and reduces the number of void periods. But are the boom times about to end?

Low Interest Rates
The Bank of England has held its ‘Bank Rate’ at 0.5 per cent since 2009 in order to help the economy recover from the effects of the recession. This in turn has kept interest rates very low, which has been fantastic for borrowers. Unfortunately interest rates are unlikely to stay this low for very much longer.

Interest Rates Set to Rise
Mark Carney, governor of the Bank of England, has already said that interest rates will almost certainly rise to between 2.5 to 3 per cent over the next three years and they will probably stay there for some time. However, experts are warning that interest rates could rise before the next general election, which will happen within the next twelve months.

Protect Your Investment
If this does happen as predicted, a lot of property investors could be caught out. Landlords who have borrowed against existing properties or come into the market fairly recently will suddenly find their monthly repayments rising steeply. One way to avoid this is to switch to a fixed rate deal and lock in for an extended period at today’s low interest rates. This will help protect your rental returns.